The top book publishing house in Italy has strengthened its status as leader. It’s also focusing on the activities, aiming to make significant improvements to profitability
Investing 127.5 million euro to win Rcs Libri, at a time when all publishers, or almost all, even foreign ones, are scampering to find their feet in the digital world, may look risky. «Quite the opposite», states Ernesto Mauri, the Ceo of Italy’s leading book and magazine publisher: «We need to be tenacious when it comes to that which we know how to do best. And we know books and magazines best. We’ve been making them for 100 years. Leadership also means focusing on activities where we can improve profitability».
And that is exactly the point. In 2008 at least 70% of the Segrate-based group’s profitability was guaranteed by magazines. Just five years later this had dropped to 40%. «We’ve had to change direction», says Mauri, talking about the veritable tsunami that hit the magazine sector, an area of business that was positive for Mondadori in 2008, amounting to approximately 130 million euro, and which recorded a loss of 20 million euro in Italy in 2013. «We studied the market: Rcs Libri was for sale. So we rolled up our sleeves to come up with the resources needed for the investment». With the acquisition of Rcs Libri, Mondadori is reinforcing its primary position within the Italian trade and educational market and significantly enriching its authors’ assets.
To those who feared for the presumed risks to the identity of the individual brands, Mauri categorically responds with: «Mondadori’s reason for being is well known», referring to past acquisitions, such as Einaudi, Sperling & Kupfer and Piemme. «The group has a vested interest in preserving and developing the identity of each individual brand. If their identity were to be lost, their economic value would be lost also. Publishing houses have to go back to being profitable in order to guarantee their freedom. There must the be the resources needed to power them, to allow them to grow, to pay the authors and to purchase rights. This is the only guarantee of autonomy for their future».
Today the book arm of Mondadori produces returns of more than 13%, while that of Rcs Libri amounts to exactly half of that, 6.5%. Mauri believes that together the two companies will be able to hit the best international benchmarks of between 15-16% within three years. «Investing in a book is a show of confidence in its potential», he comments. «We believe that our business will provide the sector with new drive». Mondadori’s goal is to sell increasingly more books, benefiting all the workers along the chain, from the authors to the booksellers, while also providing the Italian system with the opportunity to grow. And what’s more: «We will put all the actions in place that are required to create a model par excellence, which can rely on the best authors, unsurpassed circulation and a great book store network, as well as those required to promote our writers more extensively abroad».
And although the Rcs Libri transaction actually means that Mondadori will shift its focus from a struggling sector to one that is more robust and profitable, Mauri has not forgotten about magazines: «Technological develop-
ment and decreasing cultural consumption have profoundly changed the magazine industry. It is an ever-evolving process. In some ways our digital-only competitors are at an advantage, yet the value of consolidated brands and the expertise in content production cannot be invented and pays dividends over time». In other words: challenge is inevitable – across the board. «I am extremely confident, not in part because I know that I can count on the staunch and unwavering support of our shareholder», concludes the head of Mondadori. «We are working to have what it takes to become a media company that will be the star of the future, just as we have been over the last 100 years».